Corporate Governance Practices of SOEs in BRICS Member Countries

1. Corporate Governance Practices of SOEs in BRICS Member Countries Presentation to BRICS Forum on SOE Reform and Governance 19 November 2016 Restricted

2. Presentation Outline • Legislative framework • Shareholder mandate in balancing interests • Challenges in legislation • Current shareholder practices and frameworks • Conclusion Restricted

3. The shareholder has specific powers and responsibilities in the SOC governance system Parliament Transparency and accountability Presidency Performance of Minister of Public Enterprises Shareholder Representative Executive Authority Shareholder Management Defines powers and responsibilities of Shareholder Representative viz a viz the Board and Management Companies Act & PFMA establishes relationship Board Accounting Authority Management Management Agreement Board cascades delegations and performance expectations down to management 3 Restricted

4. SOC Oversight Landscape – using Eskom as an example Parliament Constitutional Oversight NGOs Minister of Public Enterprises Executive Authority Shareholder Oversight & Interface Key Customers Minister of Energy: Policy ESKOM HOLDINGS LIMITED Media National Treasury: Funding NERSA: Regulation NECSA Regulation Restricted

5. The DPE’s goal is to ensure that the SOC are both financially sustainable and is able to deliver on Government’s developmental objectives Observations (entity and shareholder level): • Complex institutional model for State ownership • Unique and unusual CEO Appointment process • Compliance burden (legislative/regulatory considerations) • Failure to meet the Shareholder Compact targets • At times, erratic shareholder support and/or intervention • Evidence of governance challenges (relationship/conflicts of interest) • Internal controls/audit outcomes • Timely / early warning information/reports National Interest Enterprise Interest DPE 8 Restricted

6. PROTOCOL ON COMMUNICATION • Audit and Risk Committee • Social Ethics Committee Restricted

7. Shareholder Oversight Process Minister Strategic Intent Statement Executive Management • The document is a product of: • Government policies • Studies commissioned • Consultation with stakeholders • Departmental assessment of the SOC • It is a Ministerial directive – however the Board can influence the process by expressing their views on the direction of the business • The SIS is issued by the end of Q4 for the next financial year • The SIS should be reflected in the: • Shareholder’s compact • Corporate planning • Executive performance contracting • Assessment of SOC submissions shall be evaluated against the directive Restricted

8. Governance Frameworks SOC accountability Restricted

9. Aluta Continua!! Improved governance will lead to improved efficiencies and overall performance Boards must maintain the highest standard of transparency, disclosure, and accountability to act in accordance with laws and best practice Through SOC Reform the tools and practices will eventually become regulations of the Shareholder Management Bill and SOC Act. Conclusion restricted

10. End – Thank You Restricted